Intel has decided to cancel a $5.4 billion chip deal due to its inability to secure regulatory approval.

Intel has withdrawn from a significant acquisition of an Israeli chip manufacturer after failing to secure the necessary regulatory clearance.

The US tech giant announced on Wednesday that it would abandon its planned $5.4 billion purchase of Tower Semiconductor (TSEM), citing a lack of timely approval from regulators. The deal was initially unveiled in February 2022.

Although Intel (INTC) did not explicitly mention the jurisdiction causing the delay, it had previously detailed its attempts to gain approval from Chinese authorities.

In April, CEO Pat Gelsinger acknowledged the challenging process and revealed his travel to China in a bid to make progress.

“As part of my recent trip to China, we continue to work hard to complete the Tower acquisition,” Gelsinger informed analysts during an earnings call.

The deal was projected to conclude within 12 months.

Now, 18 months since its announcement, the deal remains unapproved by China’s competition regulator, as reported by the Financial Times on Wednesday, citing unidentified sources.

Neither Intel nor the Chinese regulator, the State Administration of Market Regulation, promptly responded to CNN’s inquiries for comment.

Companies seeking to merge are required to seek approval from Chinese regulators if they generate a certain level of revenue from the country, according to law firms advising global businesses.

Tensions between China and the United States, along with some European and Asian allies, have escalated over semiconductors following restrictions introduced by US President Joe Biden in October to limit Beijing’s access to crucial technology.

Both Intel and Tower stated in their respective announcements that the cancellation of the deal was mutually agreed upon.

In terminating the agreement, Intel will pay Tower a termination fee of $353 million, as outlined in the California-based company’s statement.

Following the announcement, Intel shares dropped by 3.6% in New York on Wednesday, while Tower’s Nasdaq-listed stock also experienced a sharp decline of 10.7%.

Although the merger will not proceed, the two companies intend to “explore opportunities for future collaboration,” according to Gelsinger.

In the statement, he emphasized that Intel views its investments in foundries—factories producing chips for other firms—as “essential” to its overall manufacturing strategy.

“Our regard for Tower has deepened throughout this process,” Gelsinger added.

Russell Ellwanger, CEO of Tower Semiconductor, stated that while his company had been eager to join forces with Intel, the decision to terminate the deal followed “comprehensive discussions and the absence of indications regarding specific required regulatory approval.”

“We value the efforts of all parties involved,” he remarked.